Stocks’ Details

Beacon Lighting Group Limited

UnpredictableTrading Conditions to Continue in 2HFY19: Beacon Lighting Group Limited (ASX: BLX) is engaged in the business of selling of light fittings, globes, ceiling fans, and energy efficient products in the Australian market.The company, as on 30 April 2019, released an update explaining the unpredictabletrading conditions.BLX had invested in setting up new stores in the last few years which are taking a long time to reach maturity, thus, affecting the current trading environment. The company announced that trading continues to be subdued as a result of – (1) decline in housing prices and churn, (2) weaker consumer confidence, (3) the upcoming federal election, and (4) credit availability within the housing sector. Despite the unpredictable trading conditions as expected and announced as on 30 April 2019 by the company, the management expects EBITDA for FY2019 within the range of $28.5 million to $30.5 million as compared to $33.2 million in FY18.

Financial Performance: For the 26 weeks ended 23 December 2018, sales revenue saw a growth of 4.8% at $128.3 million as compared to the same period last year. The gross profit stood at $83.2 million recording an increase of 4.4% compared to the same period previous year. Gross profit margin for the same period at 64.9% was broadly in-line with 65.1% last year.


1H FY19 Results (Source: Company Reports)

What to Expect: For the Core and the Emerging Businesses, BLX will introduce new product ranges. The management is likely to open two new stores at Modbury and Craigieburn. Unpredictable trading in 2H FY19 is likely to persist, and with that, the company is working towards delivering profits, in line with FY18.

Stock Recommendation: At CMP of $1.037, as on 30 April 2019, the stock breached its 5-year low of $1.04 and trading near to it. The annual dividend yield for the stock stands at 4.37% with a market capitalization of $251.72 million. The price to book value for the stock at 3.3x is higher as compared to 2.4x of industry median. Looking at the historical price movement, the stock has given negative return of 23% and ~20% in the last 1-year and 6-months respectively.

Considering the unpredicted trading conditions leading to the tough business environment resulting to an adverse impact on financial, we, therefore, suggest to investors that they should ‘avoid’ the stock at the current market price of $1.037 per share (down 10.216% on 30 April 2019).
 

Redbubble Limited

To Resolve Organic Search Issue: Redbubble Limited (ASX: RBL) owns and operates the leading global online marketplaces hosted at Redbubble.com and TeePublic.com, powered by over 800,000 independent artists. The company released its quarterly cash flow report for the quarter ended 31 March 2019.

Financial Performance For Quarter Ended 31 March 2019: Marketplace Revenue for the group in 3Q FY19 grew by 40.3% (YoY)with the addition of TeePublic (32.6% on a constant currency basis). It is worth noting that during 4Q FY2018 and 1Q FY2019, RBL’s organic search performance accelerated rapidly, hence, comparable numbers will be tougher through September 2019.


3Q & YTD FY2019 Income Statement Summary (source: Company Reports)

What to Expect: The management will focus on the strategic initiative which is aimed at a return to strong growth.  A positive operating EBITDA for FY19 is expected.  Slower growth with associated working capital impact will result in a total free cash outflow for FY19.  

Stock Recommendation: At the current market price of $0.940 per share, the market cap of the stock stands at $284.33 million. Looking at the historical price performance, the stock has given a negative return of 28.08% in the last 1-year whereas stock gained 9.36% in last 3-months. The group witnessed strong results in the areas of strategic investments that are most critical to the marketplace growth over time.

Strong growth in marketplace revenue and gross profit with continued work to resolve organic search issue lead us to give a “Hold” recommendationon the stock at the current market price of $0.940 per share (down 15.315% on 30 April 2019).
 

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